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Antuan Company set the following standard costs for one unit of its product.

Direct materials (5.0 Ibs. @ $4.00 per Ib.)	$	20.00
Direct labor (2.0 hrs. @ $14.00 per hr.)		28.00
Overhead (2.0 hrs. @ $18.50 per hr.)		37.00
Total standard cost	$	85.00

The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level.

Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials	$	15,000
Indirect labor		75,000
Power		15,000
Repairs and maintenance		30,000
Total variable overhead costs				$	135,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		71,000
Taxes and insurance		18,000
Supervision		308,000
Total fixed overhead costs					420,000
Total overhead costs				$	555,000

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (76,500 Ibs. @ $4.10 per lb.)				$	313,650
Direct labor (19,000 hrs. @ $14.30 per hr.)					271,700
Overhead costs
Indirect materials	$	41,600
Indirect labor		176,200
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		95,850
Taxes and insurance		16,200
Supervision		308,000			712,600
Total costs				$	1,297,950

rev: 03_28_2018_QC_CS-122864

Required:
1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.

Answer 1

Flexible Budget for the month of October (at standard cost)
Capacity =>	65 % Capacity	75 % Capacity	85 % Capacity
Units (Proportionate)=>	17333	20000	22667
Particular	Per Unit ($)	Budgeted Amount ($)	Per Unit ($)	Budgeted Amount ($)	Actual Amount ($)	Variance amount ($)		Per Unit ($)	Budgeted Amount ($)
Standard cost
Direct Material	20	346,660	20	400,000	313,650	86,350	F	20	453,340
Direct Labour	28	485,324	28	560,000	271,700	288,300	F	28	634,676
Overhead	18.50	320,661	18.50	370,000	351,500 **	18,500	F	18.50	419,340
Total standard cost (A)		1,152,645		1,330,000	936,850	393,150			1,507,356
variable overhead costs
Indirect Material	0.75	13,000	0.75	15,000	41,600	26,600	A	0.75	17,000
Indirect Labour	3.75	64,999	3.75	75,000	176,200	101,200	A	3.75	85,001
Power	0.75	13,000	0.75	15,000	17,250	2,250	A	0.75	17,000
Repair and Maintenance	1.50	26,000	1.50	30,000	34,500	4,500	A	1.50	34,001
	Total variable overhead costs (B)		116,998		135,000	269,550	134,550			153,002
Fixed overhead costs
Depreciation - Building	N.A	23,000	N.A	23,000	23,000	0	-	N.A	23,000
Depreciation - Machinery	N.A	71,000	N.A	71,000	95,850	24,850	A	N.A	71,000
Taxes and Insurance	N.A	18,000	N.A	18,000	16,200	1,800	F	N.A	18,000
Supervision	N.A	308,000	N.A	308,000	308,000	0	-	N.A	308,000
	Total Fixed overhead costs (C)		420,000		420,000	443,050	26,650			420,000
Total cost (A + B + C)		1,689,642		1,885,000	1,649,450	554,350			2,080,358
Note :
Actual overhead cost at 75% capacity :	19,000 Labour hours * $18.75/hour
** Since actual rate is not given budgeted rate is used